Preserve your HSA balance while incurring expenses
There are a number of strategies that can help accountholders build their HSA balance.
Pay expenses out of pocket with after tax dollars.
Keep all your receipts and take the money out anytime in the future. Let your money earn interest, or invest it within the HSA, and take it out to provide for expenses at an appropriate time in the future.
Set up a payment plan with your provider.
Providers typically don’t charge interest if you set up a repayment plan for a large expense. Contributions to an HSA can be changed at any time. If you are not maxing out your HSA contribution, consider boosting the amount you contribute by the amount of the payment. Why pay out a large amount from your HSA if you can set up a payment plan and pay it out over time while your HSA money is earning interest or may be invested. This works for those with large HSA balances as well.
Always shop your expenses.
An MRI at a hospital is approximately $3,000, while a free-standing MRI center charges about $600. Prescription drugs also vary significantly by pharmacy. After all, a penny saved is a penny earned. Likewise, a thousand saved is a thousand earned!
Consider taking out only a portion of the expense from the HSA.
Leave the rest to earn interest and take it out in the future when you want it. Example: For a $100 expense, take out $50 and use $50 of after tax money. The other $50 can be taken out at some point in the future, after accumulating interest or being invested.
Use your HSA as an emergency savings account.
Instead of having an emergency fund that could require you to pay taxes on interest earned, spend the emergency money on medical expenses. As long as you hold on to your receipts, the emergency money is available in your HSA. If you need to take it out, you can take out as much as the total of your receipts, tax free. And you won’t have to pay taxes on the interest.